Vinson Walden and Brian McMahon, who manage the Thornburg Global Opportunities Fund, picked through the rubble in the U.K. stock market after last year’s Brexit vote to find golden opportunities. Walden said they’re still making most of the mutual fund’s new investments outside the U.S.

The Thornburg Global Opportunities Fund is run by Thornburg Investment Management of Santa Fe, New Mexico. The $2.3 billion fund is able to buy securities anywhere in the world, including the U.S. The portfolio is concentrated, typically holding 40 or fewer stocks.

Here’s how the fund’s class A shares
THOAX, -1.41%
have performed (excluding sales charges) against their Morningstar category, the MSCI All Country World Ex-USA Index (its benchmark) and the S&P 500 Index:

In an interview July 13, Walden — who co-founded the Thornburg Global Opportunity Fund in 2006 — said the fund’s managers and analysts seek to identify companies with “catalysts” to propel gains. “There is judgment involved” for valuation, business quality and prospects, which is “how we add value,” he said.

Here’s the fund’s geographic breakdown as of May 31:

Walden said he “pivoted to European cyclicals” last year. The shock in the markets following the vote in the U.K. to leave the European Union in June 2016 “presented a big opportunity.”

An example of a European cyclical stock favored by Walden is Ryanair Holdings PLC
RYAAY, -3.00%
which he calls “the Amazon of airlines.”

“This is an exceptional company that got clobbered last summer” following the Brexit vote, he said. Walden’s point is that most of Ryanair’s competitors among European airlines “have a government-control heritage,” which makes them far less efficient.

Here’s the action for Ryanair’s American depositary receipts over the past year:

FactSet

Ryanair has a “structural cost advantage in a very large industry. The biggest piece of the equation is they avoid unionized labor,” he said. Ryanair remains one of the fund’s top holdings.

Another example of a stock slammed by Brexit was Barratt Developments PLC
BDEV, +0.00%
which builds homes throughout Britain. The shares dropped 24% on June 24, 2016 (the day after the Brexit vote), and declined another 20% the next day.

FactSet

As you can see, after the initial selloff, investors began to realize the Brexit vote wouldn’t stop the construction of homes in the U.K.

The fund still owns shares of Barratt, but it’s no longer a top holding, as Walden “took some profits,” he said.

A warning

Walden said that eight years into the bull market in the U.S., “valuations are full or there may be some excess.” He said he would be “careful of the IPO market in general.”

But there is one new U.S. company he has invested in: Altice USA Inc.
ATUS, -0.69%
which went public in June.

Altice USA is the fourth-largest cable and broadband operator in the U.S. It is majority-owned and controlled by Altice N.V.
ATC, -0.89%
which was the No. 4 holding of the fund as of May 31. In June 2016, Altice USA acquired Suddenlink, which provides service in Texas and Arkansas, and Cablevision, which serves several areas in and around New York City.

Walden has followed the management team for several years and described Altice USA as “very good operators.”

“It is an acquisition story, different from most things we invest in,” he said. “They will buy similar cable/broadband companies around the country.”

And a regret

When asked about investments he may have regretted, Walden mentioned Express Scripts Holding Co.
ESRX, -1.55%
It’s a long-term holding for the Thornburg Global Opportunities Fund.

“It has historically been a very good company, but with the headwinds that have come into the health-care space, the valuations of all these companies have been under pressure.”

Philip
van Doorn

Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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Philip
van Doorn

Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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